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Above the Law – FBI’s Case Against Silk Road Boss Is A Fascinating Read

It’s been known for quite some time that the feds were desperately trying to hunt down the folks behind Silk Road, the somewhat infamous “dark web” e-commerce site, accessible only via Tor, which was famous mainly for selling drugs in a slightly anonymous fashion. Of course, when the news came out recently that the FBI had used malware to reveal Tor Browser users, many believed that this was part of an attempt to track down Silk Road, and that seems increasingly likely after the FBI announced this morning that it has arrested Silk Road’s owner, Ross William Ulbricht, who went by the moniker “Dread Pirate Roberts” online. Turns out that Ulbricht was based in San Francisco and was arrested at the public library, of all places….The case against him (pdf) is interesting, because beyond just going after him for helping to distribute illegal drugs, they claim that he solicited a Silk Road user in a murder-for-hire request (though he’s not charged with that), to potentially go after a different Silk Road user who was threatening to reveal the identities of people on the site (the user claimed to have hacked a large vendor’s account, and demanded $500,000 to not reveal names). They also go after him (of course) with a CFAA violation claim and a money laundering claim. Of course, we’ve seen the DOJ inflate and pile on charges against people in the past, so it will be worth watching to see what details come out of this — but soliciting a murder, if true, seems like a fairly big deal.

In addition, the complaint against him claims that Silk Road generated 9.5 million Bitcoins in revenue, leading to 600,000 Bitcoins in commissions (or roughly $1.2 billion in sales and $79.8 million in commissions). Of course, that seems noticeably higher than previous research had suggested. It also notes that the FBI itself made over 100 purchases on Silk Road — including ecstasy, cocaine, heroin, LSD and others. Apparently, they wanted a lot of evidence. And, in case you were wondering, the FBI informs us that their orders “have typically shown high purity levels of the drug the item was advertised to be on Silk Road.”

While the details in the complaint seem pretty thorough, there are some tidbits that stand out as questionable. The complaint clearly states that Bitcoin and Tor are both legal and have legitimate purposes, but it also says that Silk Road’s use of proxies to “hide the identities of those that run Silk Road… reflect his awareness of the illegal nature of the Silk Road enterprise.” I don’t quite see how wanting to be anonymous automatically suggests that you’re engaged in illegal behavior. Later in the complaint, the FBI agent spends an awful lot of time talking about how Ulbricht was interested in the Mises Institute, the well-known libertarian think tank. I’m not sure what that has to do with anything. The FBI notes that Dread Pirate Roberts’ defense of Silk Road included quoting Ludwig von Mises and Murray Rothbard (two economists closely associated with the Mises Institute), but lots of people follow the Mises Institute, so that seems like a stretch.

Another questionable tidbit: the FBI notes that Ulbricht posted a question to Stack Overflow using his real name, but “less than one minute later, Ulbricht changed his username at Stack Overflow from ‘Ross Ulbricht’ to ‘frosty.’” and then the FBI agent noted “I know that criminals seeking to hide their identity online will often use pseudononymous usernames to conceal their identity.” Later, after Ulbricht changes the email on the account to frosty@frosty.com — an invalid email address — the FBI agent similarly notes that “criminals seeking to hide their identity online will often use fictitious e-mail addresses.” Well, yes, but the same is true of people with perfectly legitimate reasons to be anonymous, or those who don’t want spam. While there does appear to be plenty of actual evidence, the use of these tidbits seems highly questionable.

The whole extortion/murder for hire story is a bit crazy. As noted above, one user contacted Dread Pirate Roberts, claiming to have hacked another vendor and obtained the details of users, which he’d release if not given $500,000 to pay off another drug supplier. Ulbricht asked the guy who was threatening him, a user who went by the name FriendlyChemist, to put him in touch with that supplier. After FriendlyChemist did so, Ulbricht used the opportunity to try to get that supplier to sell drugs via Silk Road. There was a further discussion, and when FriendlyChemist started getting anxious, the complaint says Ulbricht asked FriendlyChemist’s supplier how much “would be an adequate amount” in order to “put a bounty on his head.” After being quoted a price of $150,000 to $300,000 (rate dependent on “clean” or “not clean”) Ulbricht allegedly complained that the price was high, and noted that he’d previously hired someone to kill someone for $80,000. They eventually agreed to a price of $150,000 (16710 Bitcoins), and Ulbricht was told that the job was done: “Your problem has been taken care of. . . . Rest easy though, because he won’t be blackmailing anyone again. Ever.” Apparently a photo was supplied. The FBI notes that while this supposedly happened in Canada, Canadian law enforcement says that it didn’t happen.

The complaint also notes that Ulbricht has a LinkedIn page which includes a bit of a rant about “using economic theory as a means to abolish the use of coercion and aggression amongst mankind.” It also notes “I am creating an economic simulation to give people a first-hand experience of what it would be like to live in a world without the systemic use of force.” Not sure how one squares that with trying to hire someone to commit murder, but we’ll let others debate that.

It appears that while Ulbricht was mostly careful to cover his tracks, he wasn’t always that careful. The complaint notes that Silk Road was first advertised on different forums by a user named “altoid,” in a manner that indicated altoid was connected with the site. Months later, altoid also posted elsewhere that he was looking to hire an “IT pro in the Bitcoin community” for “a venture backed Bitcoin startup company” — but then told interested people to contact him at his actual gmail address: rossulbricht@gmail.com. And, voila, the FBI had a name. Also, later, when Homeland Security officials intercepted a package that contained a bunch of fake IDs for Ulbricht, they showed up at his home in July. While he generally refused to answer questions, he did tell them that “‘hypothetically’ anyone could go onto a website named ‘Silk Road’ on ‘Tor’ and purchase any drugs or fake identity documents….” There was also the above mentioned Stack Overflow account, which (briefly) used his real name and email address, which indicated that he was working on a Tor hidden service, and posted some code that (in a modified form) was also found on Silk Road.

All in all, there does seem to be a fairly compelling case built against Ulbricht based on this (though, again, we’ve seen in previous DOJ cases where things aren’t always as they seem). At a first glance, they have a lot of evidence on him. However, some questions do remain. At the beginning of the post, we mentioned the whole thing where the FBI was using malware to identify Tor users… but, of course, that doesn’t show up anywhere in the complaint. Instead, the big “breakthrough” was when a “random border search” by DHS turned up those fake identities intended for Ulbricht. However, as Parker Higgins notes, it seems like this could be a case of “parallel construction” whereby the hacking revealed those details, and DHS was then tipped off to check packages sent to Ulbricht, seeking to create “parallel construction” of evidence, in order to launder the fact that the FBI had hacked its way into identifying Tor users. After all, we’d just reported on how the FBI was actively trying to avoid revealing its hacking/malware powers to technologically sophisticated individuals.

Either way, we’re sure that there will be plenty more news on this case.

The whole sealed complaint is available on the next page…

The DOJ and the Marijuana Muddle

By 
Published: September 12, 2013
On marijuana policy, there’s a rift between the federal government and the states. It started with California’s allowing marijuana for medical use in 1996, widened as several other states followed suit, and became too big to ignore 10 months ago, when voters in Colorado and Washington decided to legalize the drug for recreational use. Under federal law possession is still a crime.
After conspicuous silence, the Justice Department announced in August that it wouldn’t try to put the toothpaste back in the tube — it wouldn’t sue to block the Colorado and Washington laws as long as those states put in place “strong and effective regulatory and enforcement systems.” But this policy hasn’t cleared up all the confusion arising from this tricky situation. Many practical questions remain, as became obvious at a Senate Judiciary Committee hearing on Tuesday about conflicts between state and federal marijuana laws.
At the hearing, James Cole, a deputy attorney general, saidthe Justice Department expects Colorado, Washington and the 18 medical marijuana states to prevent the distribution of the drug to minors, its diversion to states where it is illegal, and its possession or use on federal property, among other restrictions. Senator Charles Grassley, the ranking Republican on the Judiciary Committee, rightly asked how, exactly, the Justice Department would evaluate whether the states were holding up their end of the bargain.If a 17-year-old was caught smoking a joint in Mesa Verde National Park in Colorado, would federal prosecutors argue that the state wasn’t sufficiently tough on enforcement? Common sense says no, but guidelines are necessary. Mr. Grassley suggested, and Senators Sheldon Whitehouse and Richard Blumenthal, both Democrats, agreed, that the Justice Department should establish clear rules and explain what violations would trigger a crackdown.Senator Patrick Leahy, the committee’s Democratic chairman, pointed out that the Justice Department has yet to deal with financial issues related to state-legalized marijuana. Because federal laws make it illegal for banks to handle proceeds from drug sales, most marijuana businesses don’t have access to financial services and have to operate on a cash-only basis. That’s a problem for local law enforcement — where there are piles of cash, there’s armed robbery — and for the Internal Revenue Service, too. As Sheriff John Urquhart of Washington’s King County said, “cash-only businesses are very difficult to audit, leading to possible tax evasion, wage theft and the diversion of resources we need to protect public safety.”The Justice Department has taken a step toward figuring out this peculiar dance between the federal government and the states. If it wants its “trust but verify” approach to work, it will have to start filling in the details.

4th Amendment Blog CA5: Defendant’s consent was strictly limited and limit was ignored; suppressed

Defendant was stopped for a traffic offense, and the officer had a tip that he had drugs. When consent was sought, defendant said only his luggage, memorialized on video. The officer started searching and searched the whole car, finding a hidden panel in the door. The search far exceeded the consent, and the search should have been suppressed. United States v. Cotton, 2013 U.S. App. LEXIS 13537 (5th Cir. July 2, 2013):

[More:]

The government’s argument rests on faulty understandings of both law and fact. True, if Cotton properly limited his consent to a search of his luggage, that consent would permit Viator to enter the car and search those items. It is also true that if, during such a limited entry into the vehicle, Viator were to discover evidence of a hidden compartment, that discovery might provide probable cause to search the suspected compartment. The video evidence and Viator’s own testimony, however, reveal that he discovered the loose screws and tool markings on the driver’s-side rear door panel not as he was trying to locate Cotton’s luggage and not as he was examining the contents of such luggage. Rather, after locating and searching the luggage in the backseat area of the car, Viator expanded his search for evidence of contraband to the vehicle itself by proceeding to examine, inter alia, the driver’s-side rear door. Authority to enter and search the car for Cotton’s luggage was not authority to search discrete locations within the car where luggage could not reasonably be expected to be found. Neither was it justification for lingering in and around the vehicle for 40 minutes—much longer than a search for and of Cotton’s luggage should or could conceivably last.

Again, this is obvious. Did the District Judge just not have the guts to suppress a search so clearly in violation of the Fourth Amendment?

http://fourthamendment.com/blog/index.php?blog=1&title=ca5_defendant_s_consent_was_strictly_lim&more=1&c=1&tb=1&pb=1

Legal Times – In Fourth Circuit, a Spotlight on Warrantless GPS Tracking

In Fourth Circuit, a Spotlight on Warrantless GPS Tracking

There’s no dispute that the traffic stop one morning in May 2009 was legitimate. The driver of a Pontiac Grand Prix failed to use a signal before turning into an exit lane to leave Interstate 95 in South Carolina.

The authorities initiated a traffic stop on the exit ramp that morning near Charleston. The passenger, police would later say, was nervous. His arms and legs were shaking, according to court records.

The stop wasn’t random. Local and federal investigators, working on a drug case, secretly were monitoring the movement of the car via a global positioning device—one that had been attached without a warrant.

The passenger, Naarl Richard, who was returning from a trip to New Jersey, was convicted at trial on heroin charges. While awaiting sentencing, the U.S. Supreme Court ruled in U.S. v. Jones that the warrantless installation of a GPS tracking device amounted to a “search” under the Fourth Amendment. (Defendant Antoine Jones’s conviction and life sentence were thrown out.)

Richard won a new trial based on the Supreme Court decision. The second time around, in the summer of 2012, prosecutors weren’t allowed to use the GPS data to explain how the police ended up finding him—and the drugs. He was convicted anyway. Richard is serving a 21-year prison sentence.

The legal fight is now playing out on appeal. A lawyer for Richard on May 17 asked the U.S. Court of Appeals for the Fourth Circuit to overturn the judgment, arguing that the trial judge should have suppressed the drug evidence because it flowed from the illegal use of the GPS device. The audio from the court hearing is here.

The case is important because, for prosecutors and federal agents, there isn’t much guidance among appellate courts on how to handle challenges of warrantless GPS tracking.

Federal trial judges are divided over when the “good faith” exception to the exclusionary rule—concerning when evidence of an unlawful search can be thrown out—should be in play.

One big issue for the appellate court: Did the traffic stop constitute a new and distinct crime such that it, as Richard’s lawyer said, “purged the taint of the government’s illegal use of a GPS tracking device?”

Richard’s lawyer, G. Wells Dickson Jr. of Charleston, S.C., urged the appeals court to set aside the verdict and grant Richard a new trial—with the drug evidence, 1,000 glassine bags of heroin, excluded. (The authorities found the drugs in a false compartment under the center console of the car in which Richard was a passenger.)

“It was a legal stop, with the driver giving consent to search—none of which would have happened if we hadn’t had the GPS,” Dickson said in the Fourth Circuit. “They wouldn’t have been there.”

In court papers in the appeal, Dickson wrote: “If the government’s logic is accepted, then law enforcement could use any illegal method of their choosing to develop leads on the location of a suspect and then follow that suspect until the individual made some minor mistake such as failing to use a turn signal or failing to yield to a yellow light. This would effectively render our Fourth Amendment protections meaningless.”

Nathan Williams, an assistant U.S. attorney in Charleston, told the appellate panel that the police acted in good faith when they installed and monitored the GPS device. The Grand Prix had been stationary for weeks, save for one trip to a laundry.

“The GPS tracker was applied to do what the officers would ordinarily do—without that technology—to determine when the vehicle was going to leave the area to connect with its source,” Williams said in court.

When investigators saw the car leave the state and reach New Jersey—the source of drugs, according to an informant—they moved into position to make a traffic stop. The stop was a pretext. Investigators didn’t know whether they’d find anything illegal in the car, which was driven by Richard’s girlfriend.

After car returned to South Carolina, the authorities followed it. They pulled it over after the driver failed to signal upon entering an exit lane. “Fairly marginal traffic offense,” Williams said in the appeals court.

Williams argued that the panel judges should find the heroin evidence admissible—despite the illegal search—because the police were not acting outside the scope of their authority.

“They were doing what we would want law enforcement to do,” Williams said. “There was certainly no flagrant misconduct.” Officers were following the rules they best they could, he said.

Williams wrote in court papers: “Detectives acted with an objective, good faith belief that their conduct was lawful.”

The Supreme Court’s decision in Jones last year has sweeping consequences for law enforcement investigators. Williams said that, in cases he was handling, GPS devices were shut down after the high court’s ruling.

Williams didn’t specify the number of cases. “Across the country,” he said, “reliance on the use of GPS… was in good faith.”

The appellate court judges didn’t immediately rule after the hearing.

http://legaltimes.typepad.com/blt/2013/05/in-fourth-circuit-a-spotlight-on-warrantless-gps-tracking.html?utm_source=feedly

Why Police Lie Under Oath

OPINION – NYT

By MICHELLE ALEXANDER
Published: February 2, 2013
THOUSANDS of people plead guilty to crimes every year in the United States because they know that the odds of a jury’s believing their word over a police officer’s are slim to none. As a juror, whom are you likely to believe: the alleged criminal in an orange jumpsuit or two well-groomed police officers in uniforms who just swore to God they’re telling the truth, the whole truth and nothing but? As one of my colleagues recently put it, “Everyone knows you have to be crazy to accuse the police of lying.”

But are police officers necessarily more trustworthy than alleged criminals? I think not. Not just because the police have a special inclination toward confabulation, but because, disturbingly, they have an incentive to lie. In this era of mass incarceration, the police shouldn’t be trusted any more than any other witness, perhaps less so.

That may sound harsh, but numerous law enforcement officials have put the matter more bluntly. Peter Keane, a former San Francisco Police commissioner, wrote an article in The San Francisco Chronicle decrying a police culture that treats lying as the norm: “Police officer perjury in court to justify illegal dope searches is commonplace. One of the dirty little not-so-secret secrets of the criminal justice system is undercover narcotics officers intentionally lying under oath. It is a perversion of the American justice system that strikes directly at the rule of law. Yet it is the routine way of doing business in courtrooms everywhere in America.”

The New York City Police Department is not exempt from this critique. In 2011, hundreds of drug cases were dismissed after several police officers were accused of mishandling evidence. That year, Justice Gustin L. Reichbach of the State Supreme Court in Brooklyn condemned a widespread culture of lying and corruption in the department’s drug enforcement units. “I thought I was not naïve,” he said when announcing a guilty verdict involving a police detective who had planted crack cocaine on a pair of suspects. “But even this court was shocked, not only by the seeming pervasive scope of misconduct but even more distressingly by the seeming casualness by which such conduct is employed.”

Remarkably, New York City officers have been found to engage in patterns of deceit in cases involving charges as minor as trespass. In September it was reported that the Bronx district attorney’s office was so alarmed by police lying that it decided to stop prosecuting people who were stopped and arrested for trespassing at public housing projects, unless prosecutors first interviewed the arresting officer to ensure the arrest was actually warranted. Jeannette Rucker, the chief of arraignments for the Bronx district attorney, explained in a letter that it had become apparent that the police were arresting people even when there was convincing evidence that they were innocent. To justify the arrests, Ms. Rucker claimed, police officers provided false written statements, and in depositions, the arresting officers gave false testimony.

Mr. Keane, in his Chronicle article, offered two major reasons the police lie so much. First, because they can. Police officers “know that in a swearing match between a drug defendant and a police officer, the judge always rules in favor of the officer.” At worst, the case will be dismissed, but the officer is free to continue business as usual. Second, criminal defendants are typically poor and uneducated, often belong to a racial minority, and often have a criminal record. “Police know that no one cares about these people,” Mr. Keane explained.

All true, but there is more to the story than that.

Police departments have been rewarded in recent years for the sheer numbers of stops, searches and arrests. In the war on drugs, federal grant programs like the Edward Byrne Memorial Justice Assistance Grant Program have encouraged state and local law enforcement agencies to boost drug arrests in order to compete for millions of dollars in funding. Agencies receive cash rewards for arresting high numbers of people for drug offenses, no matter how minor the offenses or how weak the evidence. Law enforcement has increasingly become a numbers game. And as it has, police officers’ tendency to regard procedural rules as optional and to lie and distort the facts has grown as well. Numerous scandals involving police officers lying or planting drugs — in Tulia, Tex. and Oakland, Calif., for example — have been linked to federally funded drug task forces eager to keep the cash rolling in.

THE pressure to boost arrest numbers is not limited to drug law enforcement. Even where no clear financial incentives exist, the “get tough” movement has warped police culture to such a degree that police chiefs and individual officers feel pressured to meet stop-and-frisk or arrest quotas in order to prove their “productivity.”

For the record, the New York City police commissioner, Raymond W. Kelly, denies that his department has arrest quotas. Such denials are mandatory, given that quotas are illegal under state law. But as the Urban Justice Center’s Police Reform Organizing Project has documented, numerous officers have contradicted Mr. Kelly. In 2010, a New York City police officer named Adil Polanco told a local ABC News reporter that “our primary job is not to help anybody, our primary job is not to assist anybody, our primary job is to get those numbers and come back with them.” He continued: “At the end of the night you have to come back with something. You have to write somebody, you have to arrest somebody, even if the crime is not committed, the number’s there. So our choice is to come up with the number.”

Exposing police lying is difficult largely because it is rare for the police to admit their own lies or to acknowledge the lies of other officers. This reluctance derives partly from the code of silence that governs police practice and from the ways in which the system of mass incarceration is structured to reward dishonesty. But it’s also because police officers are human.

Research shows that ordinary human beings lie a lot — multiple times a day — even when there’s no clear benefit to lying. Generally, humans lie about relatively minor things like “I lost your phone number; that’s why I didn’t call” or “No, really, you don’t look fat.” But humans can also be persuaded to lie about far more important matters, especially if the lie will enhance or protect their reputation or standing in a group.

The natural tendency to lie makes quota systems and financial incentives that reward the police for the sheer numbers of people stopped, frisked or arrested especially dangerous. One lie can destroy a life, resulting in the loss of employment, a prison term and relegation to permanent second-class status. The fact that our legal system has become so tolerant of police lying indicates how corrupted our criminal justice system has become by declarations of war, “get tough” mantras, and a seemingly insatiable appetite for locking up and locking out the poorest and darkest among us.

And, no, I’m not crazy for thinking so.

Michelle Alexander is the author of “The New Jim Crow: Mass Incarceration in the Age of Colorblindness.”
A version of this op-ed appeared in print on February 3, 2013, on page SR4 of the New York edition with the headline: Why Police Lie Under Oath.

Why Police Lie Under Oath

Prosecutors say 15 cases tainted by Schaumburg cops accused of narcotics ring

Felony drug charges dropped Monday against 3 defendants

By George Houde, Special to the TribuneJanuary 29, 2013

Fallout from the recent arrest of three Schaumburg police officers continued Monday as Cook County prosecutors dropped felony charges against three defendants linked to the trio’s police work.

The state’s attorney’s office said it had reviewed 19 cases involving the officers, and 15 will be dropped. The remaining four are expected to move forward, officials said.

“All of the cases involve felony drug-related charges,” said Tandra Simonton, spokeswoman for the state’s attorney’s office.

The review began after the arrests this month of officers John Cichy, Terrance O’Brien and Matthew Hudak on allegations they started their own illegal narcotics business last year with drugs and cash they had stolen from dealers.

On Jan. 11, five days before the officers were arrested, Cichy handcuffed Marleny Gutierrez at her residence on Mors Avenue in Wheeling while executing a search warrant, according to authorities. She was charged with delivery of marijuana and freed on a $10,000 personal recognizance bond, officials said.

Assistant State’s Attorney Katherine Levine asked Judge Jill Cerone-Marisie in Rolling Meadows branch court to dismiss the charges against Gutierrez, who already was on probation for a felony drug conviction in December.

Cerone-Marisie dismissed the charge, as well as the ones pending against Raina Lewerenz, 20, of Franklin Park, charged with possession of Ecstasy pills, and Alex Garcia, 18, of Palatine, charged with delivery of cocaine.

Lewerenz was arrested in September at Woodfield Mall and was freed on a personal recognizance bond after agreeing to go to an anti-drug program, prosecutors said. Her case would have been dismissed in March if she completed the program successfully, they noted.

Garcia was arrested Jan. 4 by Palatine officers; it was not clear how the Schaumburg officers were involved in his case.

It was also unclear Monday if Garcia was in custody, or if any of the defendants knew their cases were dismissed.

Scott Slonim, supervisor of the Cook County public defender’s office at the Rolling Meadows courthouse, said the cases were dropped because the officers’ testimony would no longer be believed.

“It’s not only Schaumburg cases they infected,” said Slonim. “They worked with other police departments.”

The officers were arrested Jan. 16 by federal agents near Woodfield Mall, where the three had made a number of drug arrests over the past several years, according to authorities.

Assistant Public Defender Joe Gump said he defended a client who was arrested by the officers in 2011, before they allegedly began their own business. The man pleaded guilty last summer and received 12 years in prison.

“That case might come back in a post-conviction motion,” said Gump.

Charged with unlawful delivery of a controlled substance and calculated criminal drug conspiracy — among dozens of other offenses — the three officers remain in custody on $750,000 cash bail.

Copyright © 2013 Chicago Tribune Company, LLC

Prosecutors say 15 cases tainted by Schaumburg cops accused of narcotics ring

Little Humor for Tuesday – Chuck E. Cheech: Mice chew into evidence bags, eat and nest in marijuana

Some mighty mellow mice are lurking somewhere in the Wichita Police Department’s evidence and property building downtown.

Evidence clerks at the building at 410 N. Waco discovered that mice had chewed into and nested in three bags of marijuana connected to cases from 2009, Lt. Doug Nolte said. The clerks said it was evident the mice ate some of the marijuana, according to a police report.

“We’ve got some mice that are stoners,” Nolte said.

The clerks weighed the marijuana that was left and resealed it. The exterminator that is contracted for the building has been contacted, Nolte said.